Correlation Between Independent Bank and Dorman Products
Can any of the company-specific risk be diversified away by investing in both Independent Bank and Dorman Products at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Independent Bank and Dorman Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Independent Bank and Dorman Products, you can compare the effects of market volatilities on Independent Bank and Dorman Products and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Independent Bank with a short position of Dorman Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Independent Bank and Dorman Products.
Diversification Opportunities for Independent Bank and Dorman Products
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Independent and Dorman is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Independent Bank and Dorman Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorman Products and Independent Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Independent Bank are associated (or correlated) with Dorman Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorman Products has no effect on the direction of Independent Bank i.e., Independent Bank and Dorman Products go up and down completely randomly.
Pair Corralation between Independent Bank and Dorman Products
Given the investment horizon of 90 days Independent Bank is expected to generate 1.23 times less return on investment than Dorman Products. In addition to that, Independent Bank is 1.18 times more volatile than Dorman Products. It trades about 0.2 of its total potential returns per unit of risk. Dorman Products is currently generating about 0.29 per unit of volatility. If you would invest 11,563 in Dorman Products on August 30, 2024 and sell it today you would earn a total of 2,417 from holding Dorman Products or generate 20.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Independent Bank vs. Dorman Products
Performance |
| Timeline |
| Independent Bank |
| Dorman Products |
Independent Bank and Dorman Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Independent Bank and Dorman Products
The main advantage of trading using opposite Independent Bank and Dorman Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independent Bank position performs unexpectedly, Dorman Products can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dorman Products will offset losses from the drop in Dorman Products' long position.| Independent Bank vs. Capitol Federal Financial | Independent Bank vs. BankFinancial | Independent Bank vs. Business First Bancshares | Independent Bank vs. First Bancorp |
| Dorman Products vs. Ford Motor | Dorman Products vs. General Motors | Dorman Products vs. Goodyear Tire Rubber | Dorman Products vs. Li Auto |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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